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The Commissioner Of Incometax, Madras v. Messrs. Sri Rama Vilas Service (Private) Ltd., Madras.
Factual and Procedural Background
The question referred to this Court under S. 66(1) of the Indian Income-tax Act asked: "Whether the buses and lorries are plant and machinery 'installed' and whether development rebate under S. 10(2)(vi)(b) of the Income-tax Act is allowable on buses and lorries." The Tribunal answered the question in favour of the assessee, and the department referred the question of law to this Court.
Legal Issues Presented
- Whether buses and lorries are "plant and machinery" that are "installed" within the meaning of S. 10(2)(vi)(b) of the Income-tax Act.
- Whether development rebate under S. 10(2)(vi)(b) is allowable on buses and lorries.
Arguments of the Parties
Department's Arguments
- The further requirement in S. 10(2)(vi)(b) that plant be "installed" is not satisfied in the case of buses and lorries.
- Counsel for the department contended that installation could not be satisfied by a bus or lorry; an extreme contention that installation requires fixation to earth was not maintained.
Assessee's Arguments
- The Tribunal held, and the assessee's position was, that buses and lorries fall within the statutory definition of "plant" (S. 10(5)) and are "installed" when they are purchased and put on the road for use in the business, i.e., when set up for service.
- Examples of mobile units with moveable machinery were relied on to show such machinery may be "installed" without being fixed to earth.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of income-tax Central Bombay v. Saraspur Mills Ltd. | Principle of interpretation of "installed" as applied by the Bombay High Court | The Court respectfully agreed with the Bombay High Court's principle of interpretation and followed it. |
Court's Reasoning and Analysis
The Court examined the statutory provisions: S. 10(2)(vi)(a) (extra initial depreciation) and S. 10(2)(vi)(b) (development rebate), and noted the statutory definition in S. 10(5) that "plant" includes vehicles. The word "installed" is not statutorily defined. The Court considered dictionary definitions (Webster's New International, Shorter Oxford, Fun and Wagnalls), which describe "installed" as "to place an apparatus in position for service or use."
Applying that ordinary meaning and the extended statutory definition of "plant," the Court concluded that "installed" must be construed with reference to the mode of installation that the particular plant is capable of. For buses and lorries, the statutory test of installation is satisfied when they are purchased and put on the road for use in the assessee's business — i.e., when the "plant or machinery" is set up for service. The Court rejected the department's contention that installation requires fixation to the earth, noting examples of mobile units whose movable machinery would be "installed" for the purposes of the statute. The Court expressly relied on and agreed with the similar view taken by the Bombay High Court in the cited case.
Holding and Implications
Question answered in the affirmative and in favour of the assessee.
Direct consequences: the assessee is entitled to the development rebate under S. 10(2)(vi)(b) for buses and lorries treated as "installed" when set up for service; the department has failed and must pay the assessee's costs (counsel's fee Rs. 250).
No broader new precedent was announced beyond the Court's agreement with the principle of interpretation applied by the Bombay High Court.
(1) The question referred to this court under S. 66(1) of the Indian Income-tax Act ran:
"Whether the buses and lorries are plant and machinery "installed" and whether development rebate under S. 10(2)(vi)(b) of the Income-tax Act is allowable on buses and lorries."
(2) That question was answered in favour of the assessee by the Tribunal, and the question of law was referred to this Court at the instance of the department.
(3) Section 10(2)(vi)(a) provides for what is called an extra initial depreciation, and that applies to machinery or plant, being new, which has been installed after the 31st day of March 1948. Section 10(2)(vi)(b) provides for a further relief to the tax-payer, and what was called a development rebate has been granted in the case of new machinery or plant installed after 31-3-1954. The word "plant" itself was given a statutory definition in S. 10(5) of the Act; "Plant" includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation.
(4) It should be clear that the expression "plant or machinery installed" should be given the same meaning both in S. 10(2)(vi)(a) and S. 10(2)(vi)(b). That the buses and lorries come within the scope of the statutory expression "plant" is not disputed. What the learned counsel for the department urged was that in the case of buses and lorries the further requirement of S. 10(2)(vi)(b), that they should be "installed" before the development rebate is allowable, has not been satisfied. The word "installed" itself has not been statutorily defined. In view of the extended statutory definition of the word "plant" in S. 10(5) of the Act it seems clear to us that the word "installed" in relation to the machinery or plant, must be construed to mean such installation as that plant is capable of. The Assistant Commissioner referred to the dictionary meaning of the word "installed" as given in Webster's New International English Dictionary "to set up or fix in position for use or service as to install a heating or lighting system.' The Shorter Oxford Dictionary in English gives as one of the meanings "to place an apparatus, a system of lighting, heating, or the like in position for service or use." Much the same meaning is given in Fun and Wagnalls New Standard Dictionary "to place in position for service or use, as to install hot water system." Putting aside the examples given in the dictionary meaning to explain the scope of the word "installed", "installed" would certainly mean "to place an apparatus in position for service or use". As we said, that a bus, or a lorry is a plant within the meaning of S. 10(2)(vi)(b) cannot and does not admit of any doubt. The only other question is whether, when a bus or a lorry is purchased and is also put on the road in the course of the business that the assesses carried on it could be said that the requirement of installation has been satisfied. That the bus or lorry has been set up for use of service when it is put on the road seems clear to us and in that sense bus or lorries were installed. The statutory test of installation was satisfied by the assessee because such installation as the bus and lorries were capable of was completed.
(5) The learned counsel for the department urged that the requirement of installation with reference to plant and machinery could not possibly be satisfied by a bus or a lorry. Learned counsel could not support an extreme contention, that installation necessarily meant something fixed to earth and thereby becoming immovable. When we pointed out that a mobile van with moveable machinery for carrying out the repairs in the case of a bus operator was a familiar example and any machinery purchased and used for such a mobile unit would be machinery "installed", learned counsel could not challenge that position. That is why we said the word "installed" has to be given its normal meaning and with reference to a given plant or a machinery we have not to see whether such installation as that machinery is capable of has been achieved. That test, in our opinion, was satisfied by the assessee when he put the buses and lorries on the road, that is when his "plant or machinery" was set up for service.
(6) We find that the Bombay High Court has taken a similar view in Commissioner of income-tax Central Bombay v. Saraspur Mills Ltd., . We respectfully agree with the principle of interpretation laid down by the Bombay High Court in that case.
(7) The question referred to this court is answered in the affirmative and in favour of the assessee. As the department has failed, it will pay the costs of the assessee. Counsel's fee Rs. 250.
(8) Question answered in affirmative.
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